At WTO, India can use strategic trade-off to break the PSH deadlock

India’s long-standing priority at the World Trade Organisation has been securing a permanent solution to the public stockholding (PSH)—a policy that allows governments to procure and stockpile food grains for food security and price support without breaching WTO subsidy limits.

This demand remains vital for protecting procurement programmes that sustain hundreds of millions of poor farmers and consumers. Yet developed members have shown little urgency on this issue.

The current focus of most members is instead on integrating the Investment Facilitation for Development (IFD) Agreement into the WTO framework. 

As the 14th WTO Ministerial Conference (MC14) in Yaoundé (March 26-29) approaches, pressure is expected to intensify—especially if South Africa softens its stance—potentially isolating India. 

Rather than resisting alone, India could reshape the negotiating dynamic through a strategic trade-off: remove its objection to incorporating the IFD Agreement in exchange for a permanent PSH solution. This approach is not unprecedented.

At the 2013 Bali Ministerial and its follow-up General Council meeting in Geneva in 2014, India secured the first “peace clause” on food security by allowing consensus on the Trade Facilitation Agreement.

A similar bargain at MC14 could convert mounting pressure into negotiating leverage, aligning India’s food security imperative with the investment priorities of developed members.

To appreciate this interplay, let us understand how negotiations and decisions take place in the WTO and what has set ‘investment’ apart from other discussions.

Although trade and investment both drive economic development, they are regulated differently. Trade is governed by WTO and free trade agreement commitments, while investment is handled through domestic laws and international investment agreements outside the WTO.

Unlike traded goods, investments maintain ongoing ties to their origin, and entering into an investment treaty affects policy space and sovereignty in host countries.

In the WTO, decisions are taken by consensus at Ministerial Conferences and the General Council. New multilateral agreements become Annex 1 documents.

Plurilateral agreements listed in Annex 4 bind only participating members and create no obligations for non-participating members. Adding agreements to either annex requires the consensus of the entire membership.

Investment debates at the WTO began at the 1996 Singapore Ministerial, where “trade and investment” was introduced. India and other developing countries opposed it, citing sovereignty concerns.

In July 2004, members agreed to negotiate trade facilitation but explicitly ruled out investment talks, creating a clear negative mandate.

However, in 2017, some members tried to bring investment back, but India blocked it. Subsequently, these members discussed it outside the WTO’s formal negotiating mandate and proposed the finalised IFD Agreement for incorporation as an Annex 4 document at MC13 in 2024 in Abu Dhabi.

India and South Africa blocked this proposal, arguing that the IFD initiative reintroduces investment through a “procedural backdoor”. 

Proponents argue that the IFD text excludes contentious commitments of market access and investor-State dispute settlement (ISDS) and extends MFN to non-participants as well.

Critics, however, contend that commitments to administrative processes can render market access. The so-called firewall to keep out ISDS disputes is a one-way valve.

Investors can always invoke ISDS under their respective IIAs using the Fair and Equitable Treatment (FET) clause. 

The MFN treatment, though extended to non-participants in Article 5, is negated by the footnote. Finally, the IFD Agreement can be amended by a two-third majority, meaning all contentious issues kept outside can be brought back later. 

Facilitation improves the flow of foreign direct investment. However, the need for an international treaty is suspect.

Unlike trade agreements, in which exporting countries seek assurances of market access through treaties, in the investment space, it is in the interests of FDI-seeking countries to facilitate, for which there is no need for an international treaty commitment.

Legal and systemic implications: The proponents are seeking to incorporate IFD into the WTO under Article X:9 of the Marrakesh Agreement. Article X:9 provides for the addition of a trade agreement to Annex 4, which should be by consensus.

IFD, however, is not a trade agreement. Additionally, IFD is not a treaty under the Vienna Convention on the Law of Treaties (VCLT).

Systemically, IFD raises concerns about the erosion of the WTO’s multilateral mandate, which operates on a consensus-based decision-making model—introducing IFD through such plurilateral initiatives risks eroding this foundation, particularly given the WTO’s prior negative stance on investment.

It will also set a precedent, which is illegal. Further, it will reinforce asymmetrical bargaining power at the WTO between powerful and smaller developing and LDC members.

Strategic implications for India: Geopolitically, the IFD is dominated by China, with 99 of the 128 IFD participants also being members of China’s Belt and Road Initiative (BRI).

IFD is a strategic tool for China to secure its global investment footprint and “String of Pearls” strategy under a multilateral shield of the WTO.

Notwithstanding the implications, India can avoid potential isolation by allowing consensus on the incorporation of the IFD Agreement in exchange for a permanent solution to the Public Stock Programmes of developing countries for their food security. 

The writer is a former chairman of the Technical Barriers to Trade Committee of the WTO and was a director in the Department of Economic Affairs.

(Disclaimer: The views expressed above are the author's own. They do not necessarily reflect the views of DH.)